The U.S. Small Business Administration has released a 1-page form that simplifies the application for forgiveness of Paycheck Protection Program loans. The form also contains newly updated forms that comply with the latest stimulus legislation.
Congress approved the COVID-19 relief package in the month of March that included $284 billion of financing to small businesses in need of loans. The money was intended to reduce the economic burden of the coronavirus outbreak. It also included a requirement that the SBA to issue streamlined forms within the first 24 hours of the bill being approved by the lawmaker to streamline the process of applying for forgiveness. It also included conditions meant to encourage more loans from community banks, specifically for minority-owned companies that were unable to obtain loans last year.
“The Small Business Administration met the requirement of releasing the single-page form for PPP loan forgiveness within 24 hours of the date of enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars, a partner at Thomas, Zollars & Lynch CPAs on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also issued more updated forms.”
First Draw PPP Conditions for loan forgiveness
Are Parent Plus Loans Forgiven – First Draw PPP loans made to borrowers who are eligible can be granted full loan forgiveness if during the 8- to 24-week covered period following the loan’s disbursement
- The levels of compensation and employee pay are kept at a constant level.
- The proceeds of the loan can be used to pay for payroll costs or other eligible expenses.
- Minimum 60% of profits go towards expenses for payroll
Second Draw PPP Loan Forgiveness Conditions
Second Draw PPP loans to eligible borrowers can be eligible for loan forgiveness when the loan is paid within an 8to 24 week time frame.
- Employee and compensation levels are maintained in the same way in accordance with the First Draw PPP loan
- The loan funds are used on payroll costs and other expenses that are eligible and
- A minimum of 60% of the proceeds go to the cost of payroll
- How to apply for loan forgiveness and the time to apply
Once all of the loan’s proceeds have been used, a borrower can apply to be forgiven. The borrower can apply for forgiveness at any time up to the date of maturity. If borrowers do not apply for forgiveness within 10 months of the expiration date of the loan will be able to receive payment from their PPP lender.
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